Renewed attention is now given to the development and
utilization of renewable sources of energy, in response to
growing concerns about climate change, acidification, and urban
air pollution, and interest in secure and affordable supplies of
energy for economic and social development, which was the
dominating rationale behind the interest of the 1970s. The
growing aspirations of an expanding world population are expected
to increase world energy demand, even if strong efforts are made
to improve energy efficiency. If this growing world energy demand
is to be met with fossil fuels to any significant degree, carbon
dioxide (CO2) emissions will increase considerably,
not decrease as implied by the Framework Convention on Climate
Change and the reports from the Intergovernmental Panel on
Climate Change. For example, CO2 emissions are
projected to grow by 2020 by 41 per cent in the reference
scenario and by 93 per cent in the high-growth scenario of the
World Energy Council Commission (1993).

The flow of renewable energy to the Earth's land surface is
thousands of times greater than mankind's present rate of total
energy use. Utilizing only a small fraction of this resource
would provide humanity with an alternative and environmentally
sound path towards meeting future energy needs. The question is
whether this flow of energy can be converted to modern energy
carriers such as electricity and liquid and gaseous fuels at
acceptable costs in a sustainable manner.

An evaluation of the potential contribution of renewable
energies concluded that, given adequate support, renewable energy
technologies could meet much of the growing demand at prices
lower than those usually forecast for conventional energy
(Johansson et al., 1993). By the middle of the twenty-first
century, renewable energy could account for three-fifths of the
world's electricity market (see fig. 11.1) and two-fifths of the
market for fuels used directly (see fig. 11.2). Moreover, making
a transition to a renewables-intensive energy economy would
provide environmental and other benefits not measured in standard
economic accounts (see table 11.1). For example, by 2050 global
CO2 emissions would be reduced to 75 per cent of their
1985 levels provided that energy efficiency and renewables are
both pursued aggressively (see figs. 11.3a and 11.3b). And
because renewable energy is expected to be competitive with
conventional energy, such benefits could be achieved at no
additional cost.

Impressive technical gains in renewable-energy technologies
and systems have been made during the past decade.
Renewable-energy systems have benefited from developments in
electronics, biotechnology, materials sciences, and other energy
areas. For example, advances in jet engines for military and
civilian aircraft applications, and in coal gasification for
reducing air pollution from coal combustion, have made it
possible to produce electricity competitively using gas turbines
derived from jet engines and fired with gasified biomass.1
And fuel cells developed originally for the space programme have
opened the door to the use of hydrogen as a non-polluting fuel
for transportation. Indeed, many of the most promising options
are the result of advances made in areas not directly related to
renewable energy, and were scarcely considered a decade ago.

Moreover, because the size of most renewable-energy equipment
is small, the development and use of renewable-energy
technologies can advance at a faster pace than conventional
technologies. Whereas large energy facilities require extensive
construction in the field, where labour is costly and
productivity gains difficult to achieve, most renewable-energy
equipment can be constructed in factories, where it is easier to
apply modern manufacturing techniques that facilitate cost
reduction. The small scale of the equipment also makes the time
required from initial design to operation short, so that needed
improvements can be identified by field testing and quickly
incorporated into modified designs. In this way, many generations
of technology can be introduced in short periods. This is
reflected in analysis of "learning curves." These show
costs as a function of integrated market volume. The examples of
photovoltaic modules (Williams and Terzian, 1993) and biomass
gasification/gas turbine power generation (Elliott and Booth,
1993) have been discussed.

Table 11.1 The benefits of renewable energy not
captured in standard economic accounts

Social and economic
development

Production of renewable
energy, particularly biomass, can provide economic
development and employment opportunities, especially in
rural areas, that otherwise have limited opportunities
for economic growth. Renewable energy can thus help
reduce poverty in rural areas and reduce pressures for
urban migration.

Land restoration

Growing biomass for energy
on degraded lands can provide the incentives and
financing needed to restore lands rendered nearly useless
by previous agricultural or forestry practices. Although
lands farmed for energy would not be restored to their
original condition, the recovery of these lands for
biomass plantations would support rural development.
prevent erosion, and provide a better habitat for
wildlife than at present.

Reduced air pollution

Renewable-energy
technologies, such as methanol or hydrogen for fuel-cell
vehicles, produce virtually none of the emissions
associated with urban air pollution and acid deposition,
without the need for costly additional controls.

Abatement of global warming

Renewable energy use does
not produce carbon dioxide and other greenhouse emissions
that contribute to global warming. Even the use of
biomass fuels will not con tribute to global warming: the
carbon dioxide released when biomass is burned equals the
amount absorbed from the atmosphere by plants as they arc
grown for biomass fuel.

Fuel supply diversity

There would be substantial
interregional energy trade in a renewables-intensive
energy future, involving a diversity of energy carriers
and suppliers. Energy importers would be able to choose
from among more producers and fuel types than they do
today and thus would he less vulnerable to monopoly price
manipulation or unexpected disruptions of supplies. Such
competition would make wide swings in energy prices less
likely, leading eventually to stabilization of the world
oil price. The growth in world energy trade would also
provide new opportunities for energy suppliers.
Especially promising are the prospects for trade in
alcohol fuels such as methanol derived from biomass,
natural gas (not a renewable fuel but an important
complement to renewables), and, later, hydrogen.

Reducing the risks of
nuclear weapons proliferation

Competitive renewable
resources could reduce incentives to build a large world
infrastructure in support of nuclear energy, thus
avoiding major increases in the production,
transportation, and storage of plutonium and other
nuclear materials that could be diverted to nuclear
weapons production.

The advances are described and analysed in Johansson et al.
(1993), a volume prepared for the United Nations. Two other
important overview volumes in the field are Jackson (1993) and
World Energy Council (1993).

3. Constructing a renewables-intensive global energy scenario

The findings are based on a renewables-intensive global energy
scenario, which was developed in order to identify the potential
markets for renewable technologies in the years 2025 and 2050,
assuming that market barriers to these technologies are removed
by comprehensive national policies (see "An Agenda for
Action" in Johansson et al.. 1993: chap. 1). Some global
features of the scenario are presented in figures 11.1 to 11.4.
Separate detailed scenarios were constructed for 11 world
regions.²

In constructing the scenario it was assumed that
renewable-energy technologies will capture markets whenever (a) a
plausible case can be made that renewable energy is no more
expensive on a life-cycle cost basis than conventional
alternatives,³ and (b) the use of renewable technologies at the
levels indicated will not create significant environmental,
land-use, or other problems. The economic analysis did not take
into account any credits for the external benefits of renewables
listed in table 11.1.

Energy demand

The market for renewable energy depends in part on the future
demand for energy services: heating and cooling, lighting,
transportation, and so on. This demand, in turn, depends on
economic and population growth and on the efficiency of energy
use. Future energy supply requirements can be estimated by taking
such considerations into account. For the construction of the
renewables-intensive energy scenario, future levels of demand for
electricity and for solid, liquid, and gaseous fuels were assumed
to be the same as those projected in a scenario by the Response
Strategies Working Group of the Intergovernmental Panel on
Climate Change.

The Working Group developed several projections of energy
demand. The one adopted for the renewables-intensive scenario is
characterized by "high economic growth" and
"accelerated policies" (see fig. 11.5). The accelerated
policies case was designed to demonstrate the effect of policies
that would stimulate the adoption of energy-efficient
technologies, without restricting economic growth. Because
renewable technologies are unlikely to succeed unless they are
part of a programme designed to minimize the overall cost of
providing energy services, the energy-efficiency assumptions
underlying the accelerated policies scenario are consistent with
the objectives of the renewables-intensive scenario.

The high economic growth, accelerated policies scenario
projects a doubling of world population and an eight-fold
increase in gross world economic product between 1985 and 2050.
Economic growth rates are assumed to be higher for developing
countries than for those already industrialized. Energy demand
grows more slowly than economic output because of the accelerated
adoption of energy-efficient technologies, but demand growth
outpaces efficiency improvements - especially in rapidly growing
developing countries. World demand for fuel (excluding fuel for
generating electricity) is projected to increase by 30 per cent
between 1985 and 2050 and demand for electricity by 265 per cent
(see fig. 11.5).

The Working Group's assumptions about energy efficiency gains
are ambitious; none the less, cost-effective efficiency
improvements greater than those in the scenario are technically
feasible, and new policies can help speed their adoption.
Structural shifts to less energy-intensive economic activities,
for example knowledge-intensive electronics, information
technologies, and biotechnology, may also reduce the energy needs
of modern economies below those projected.4

Energy resources

Construction of a global energy supply scenario must be
consistent with energy resource endowments and various practical
constraints on the recovery of these resources. Some key elements
of a renewables-intensive global energy system are as follows:

 There would be a diversity of energy sources, the
relative abundance of which would vary from region to region.
Electricity could be provided by various combinations of
hydroelectric power, intermittent renewable power sources
(wind, solar thermal electric, and photovoltaic power)?
biomass power, and geothermal power. Fuels could be provided
by methanol, ethanol, hydrogen, and methane (biogas) derived
from biomass, supplemented by hydrogen derived
electrolytically from intermittent renewables.

 Biomass would be widely used. Biomass would be
grown sustainably and converted efficiently to electricity
and liquid and gaseous fuels using modern technology, in
contrast to the present situation, where biomass is used
inefficiently and sometimes contributes to deforestation.

Intermittent renewables would provide as much as one-third
of total electricity requirements cost-effectively in most
regions, without the need for new electrical storage
technologies.

 Natural gas would play a major role in supporting
the growth of a renewable-energy industry. Natural-gas-fired
turbines, which have low capital costs and can quickly adjust
their electrical output, can provide excellent backup for
intermittent renewables on electric power grids. Natural gas
would also help launch a biomass-based methanol industry;
methanol might well be introduced using natural gas
feedstocks before the shift to methanol derived from biomass
occurs.

 Most electricity produced from renewable sources
would be fed into large electrical grids and marketed by
electric utilities.

 Liquid and gaseous fuels would be marketed much as
oil and natural gas are today. Large oil companies could
become the principal marketers; some might also become
producers, perhaps in joint ventures with agricultural or
forest-product industry firms.

Renewable energy

In the renewables-intensive energy scenario, global
consumption of renewable resources reaches a level equivalent to
318 exajoules per year (EJ/yr) of fossil fuels by 2050 a rate
comparable to total present world energy consumption. Though
large, this rate of production involves using less than 0.01 per
cent of the 3.8 million EJ of solar energy reaching the earth's
surface each year. The total electric energy produced from
intermittent renewable sources (some 34 EJ/ yr) would be less
than 0.003 per cent of the sunlight that falls on land and less
than 0.1 per cent of the energy available in the winds. Moreover,
the electric energy that would be recovered from hydro-power
resources, some 17 EJ/yr by 2050, is small relative to the
130-160 EJ/yr that are theoretically recoverable (Moreira and
Poole, 1993). The amount of energy targeted for recovery from
biomass 206 EJ/yr by 2050 - is also small compared with the rate
(3,800 EJ/yr) at which plants convert solar energy to biomass
(Hall et al., 1993).

The production levels considered are therefore not likely to
be constrained by resource availability. A number of other
practical considerations, however, do limit the renewable
resources that can be used. The scenario was constructed subject
to the following restrictions.

First, biomass must be produced sustainably (see Johansson et
al., 1993: 13 and 593), with none harvested from virgin forests.
Some 62 per cent of the biomass supply would come from
plantations established on degraded lands or, in industrialized
countries, on excess agricultural lands. Another 32 per cent
would come from residues of agricultural or forestry operations.
Some residues must be left behind to maintain soil quality or for
economic reasons; three-quarters of the energy in urban refuse
and timber and pulpwood residues, one-half of residues from
ongoing logging operations, one-quarter of the dung produced by
livestock, one-quarter of the residues from cereals, and about
two-thirds of the residues from sugar cane are recovered in the
scenario. The remaining 6 per cent of the biomass supply would
come from forests that are now routinely harvested for timber,
paper, or fuelwood. Production from these forests can be made
fully sustainable although some of these forests are not well
managed today.

Secondly, although wind resources are enormous, the use of
wind equipment will be substantially constrained in some regions
by land-use restrictions - particularly where population
densities are high. In the scenario, substantial development of
wind power takes place in the Great Plains of the United States
(where most of the country's wind resources are found), whereas
in Europe the level of development is limited because of
"severe land-use constraints" (Grubb and Meyer, 1993).

Thirdly, the amounts of wind, solar-thermal, and photovoltaic
power that can be economically integrated into
electricity-generating systems are very sensitive to patterns of
electricity demand as well as weather conditions. The marginal
value of these so-called intermittent electricity sources
typically declines as their share of the total electricity market
increases. Analysis of these interactions suggests that
intermittent electricity generators can provide 25-35 per cent of
the total electricity supply in most parts of the world (Kelly
and Weinberg, 1993). Some regions would emphasize wind, while
others would find photovoltaic or solar-thermal electric systems
more attractive. On average, Europe is a comparatively poor
location for intermittent power generation, so that the
penetration of intermittent renewables there is limited to 14 per
cent in 2025 and 18 per cent in 2050.

An interesting approach to the intermittence of wind energy
has been proposed by Cavallo (1994). Wind electricity generated
in the US Midwest and transported to major demand centres is
projected to cost about 6 cents per kWh at the demand site, with
a capacity factor of 70 per cent (this is essentially equivalent
to base load generation in conventional power stations). The
increased availability is achieved through wind farm oversizing
(in relation to transmission capacity), increased hub heights,
and compressed air storage.

Fourthly, although the exploitable hydroelectricity potential
is large, especially in developing countries (Moreira and Poole,
1993), and hydropower is an excellent complement to intermittent
electricity sources, the development of hydropower will be
constrained by environmental and social concerns - particularly
for projects that would flood large areas. Because of these
constraints, it is assumed that only a fraction of potential
sites would be exploited, with most growth occurring in
developing countries. Worldwide, only one-quarter of the
technical potential, as estimated by the World Energy Conference,
would be exploited in the scenario by 2050. Total
hydroelectricity production in the United States, Canada, and
OECD Europe would increase by only one-third between 1985 and
2050, and some of the increase would result from efficiency gains
achieved by retrofitting existing installations.

The levels of renewable energy development indicated by this
scenario represent a tiny fraction of the technical potential for
renewable energy. Higher levels might be pursued, for example, if
society were to seek greater reductions in CO2
emissions. The scenario presented here is based on stringent
standard economic criteria, without including a value for the
benefits indicated in table 11.1. Cost reductions through
research and development and "learning curve" effects
would permit a higher utilization, under the same economic
criteria.

A renewables-intensive energy future would introduce new
choices and competition in energy markets. Growing trade in
renewable fuels and natural gas would diversify the mix of
suppliers and the products traded (see fig. 11.4), which would
increase competition and reduce the likelihood of rapid price
fluctuations and supply disruptions. It could also lead
eventually to a stabilization of world energy prices. In
addition, new opportunities for energy suppliers would be
created. Especially promising are prospects for trade in alcohol
fuels, such as methanol derived from biomass. Land-rich countries
in sub-Saharan Africa and Latin America could become major
alcohol fuel exporters,

Conventional fuels

By making efficient use of energy and expanding the use of
renewable technologies, the world can expect to have adequate
supplies of fossil fuels well into the twenty-first century.
However, in some instances regional declines in fossil fuel
production can be expected because of resource constraints.

Oil production outside the Middle East would decline slowly
under the renewables-intensive scenario, so that one-third of the
estimated ultimately recoverable conventional resources will
remain in the ground in 2050. As a result, non-Middle Eastern oil
production would drop from 103 EJ/yr in 1985 to 31 EJ/yr in 2050.
To meet the demand for liquid fuels that cannot be met by
renewables, oil production is assumed to increase in the Middle
East, from 24 EJ/yr in 1985 to 34 EJ/yr in 2050. Total world
conventional oil resources would decline from about 9,900 EJ in
1988 to 4,300 EJ in 2050.

Although remaining conventional natural gas resources are
comparable to those for conventional oil, natural gas is
presently produced globally at just half the rate for oil. With
adequate investment in pipelines and other infrastructure
components, natural gas could be a major energy source for many
years. In the decades ahead, substantial increases in natural gas
production are feasible for all regions of the world except for
the United States and OECD Europe. For the United States and OECD
Europe, where resources are more limited, production would
decline slowly, so that one-third of these regions, natural gas
resources will remain in 2050. In aggregate, natural gas
production outside the Middle East would increase slowly, from 62
EJ/yr in 1985 to 75 EJ/yr in 2050. However, in the Middle East,
where natural gas resources are enormous and largely unexploited,
production would expand more than 12-fold, to 33 EJ/yr in 2050.
Globally, about half the conventional natural gas resources would
remain in 2050.

The renewables-intensive scenario was developed for future
fuel prices that are significantly lower than those used in most
long-term energy forecasts. It is expected that in the decades
ahead the world oil price would rise only modestly and the price
of natural gas would approach the oil price (which implies that
the natural gas price paid by electricity utilities would roughly
double). There are two primary reasons for expecting relatively
modest energy price increases: first, overall demand for fuels
would grow comparatively slowly between 1985 and 2050 because of
assumed increases in the efficiency of energy use; and, secondly,
renewable fuels could probably be produced at costs that would
make them competitive with petroleum at oil prices not much
higher than at present.

4. Public policy issues

A renewables-intensive global energy future is technically
feasible, and the prospects are excellent that a wide range of
new renewable-energy technologies will become fully competitive
with conventional sources of energy during the next several
decades. Yet the transition to renewables will not occur at the
pace envisaged if existing market conditions remain unchanged.
Private companies are unlikely to make the investments necessary
to develop renewable technologies because the benefits are
distant and not easily captured by individual firms. Moreover,
private firms will not invest in large volumes of commercially
available renewable-energy technologies because renewable-energy
costs will usually not be significantly lower than the costs of
conventional energy. And, finally, the private sector will not
invest in commercially available technologies to the extent
justified by the external benefits (e.g. a stabilized world oil
price or reduced greenhouse gas emissions) that would arise from
their widespread deployment. If these problems are not addressed,
renewable energy will enter the market relatively slowly.

Fortunately, the policies needed to achieve the twin goals of
increasing efficiency and expanding markets for renewable energy
are fully consistent with programmes needed to encourage
innovation and productivity growth throughout the economy. Given
the right policy environment, energy industries will adopt
innovations, driven by the same competitive pressures that have
revitalized other major manufacturing businesses around the
world.

Electricity utilities will have to shift from being protected
monopolies enjoying economies of scale in large generating plants
to being competitive managers of investment portfolios that
combine a diverse set of technologies, ranging from advanced
generation, transmission, distribution, and storage equipment to
efficient energy-using devices on customers' premises. Automobile
and truck manufacturers, and the businesses that supply fuels for
these vehicles, will need to develop entirely new products. A
range of new fuel and vehicle types, including fuel-cell vehicles
powered by alcohol or hydrogen, are likely to play major roles in
transportation in the next century.

Capturing the potential for renewables requires new policy
initiatives. The following policy initiatives are proposed to
encourage innovation and investment in renewable technologies:

 Subsidies that artificially reduce the price of
fuels that compete with renewables should be removed; if
existing subsidies cannot be removed for political reasons,
renewable-energy technologies should be given equivalent
incentives.

 Taxes, regulations, and other policy instruments
should ensure that consumer decisions are based on the full
cost of energy, including environmental and other external
costs not reflected in market prices.

 Government support for research on and development
and demonstration of renewable-energy technologies should be
increased to reflect the critical roles renewable-energy
technologies can play in meeting energy, developmental, and
environmental objectives. This should be carried out in close
cooperation with the private sector.

 Government regulation of electricity utilities
should be carefully reviewed to ensure that investments in
new generating equipment are consistent with a
renewables-intensive future and that utilities are involved
in programmes to demonstrate new renewable-energy
technologies in their service territories.

 Policies designed to encourage the development of a
biofuels industry must be closely coordinated with both
national agricultural development programmes and efforts to
restore degraded lands.

 National, regional, and international institutions
should be created or strengthened to implement
renewable-energy programmes.

 International development funds available for the
energy sector should be directed increasingly to renewables.

 A strong international institution should be
created to assist and coordinate national and regional
programmes for increased use of renewables, to support the
assessment of energy options, and to support centres of
excellence in specialized areas of renewable-energy research.

There are many ways such policies could be implemented. The
preferred policy instruments will vary with the level of the
initiative (national, regional, and/or international). The
preferred options will reflect differences in endowments of
renewable resources, stages of economic development, and cultural
characteristics.

The traditional approach of market introduction involves the
identification and addressing of niche markets, where the
comparative advantages of the new technology are the most
valuable, leading to experience being gained and costs reduced.
An interesting alternative approach has been suggested, where the
"learning curve" of photovoltaics is extended into the
future. Williams and Terzian (1993) observe that a sufficiently
large investment now would bring costs down much faster than for
a niche market approach, and would, in fact, be an economically
advantageous proposition.

The integrating theme for all such initiatives, however,
should be an energy policy aimed at promoting sustainable
development. It will not be possible to provide the energy needed
to bring a decent standard of living to the world's poor or to
sustain the economic well-being of the industrialized countries
in environmentally acceptable ways, if the present energy course
continues. The path to a sustainable society requires more
efficient energy use and a shift to a variety of renewable-energy
sources.

Although not all renewables are inherently clean, there is
such a diversity of choices that a shift to renewables carried
out in the context of sustainable development could provide a far
cleaner energy system than would be feasible by tightening
controls on conventional energy.

The central challenge to policy makers in the decades ahead is
to frame economic policies that simultaneously satisfy both
socioeconomic developmental and environmental challenges. This
analysis demonstrates the enormous contribution that
renewable-energy can make in addressing this challenge. It
provides a strong case that carefully crafted policies can
provide a powerful impetus to the development and widespread use
of renewable-energy technologies and can lead ultimately to a
world that meets critical socio-economic, developmental, and
environmental objectives.

Acknowledgements

This paper draws heavily on work done together with Henry
Kelly, Amulya Reddy, and Robert Williams, which has been
published in Johansson et al. (1993).

Notes

1. In this study, the term "biomass" refers to any
plant matter used directly as fuel or converted into fluid fuels
or electricity. Sources of biomass are diverse and include the
wastes of agricultural and forest-product operations as well as
wood, sugar cane, and other plants grown specifically as energy
crops.

2. The regions are Africa, Latin America, South and East Asia,
centrally planned Asia, Japan, Australia/New Zealand, the United
States, Canada, OECD Europe, former centrally planned Europe, and
the Middle East.

3. Assumptions about the cost and performance of future
renewable-energy equipment arc based on detailed analyses of
technologies in Johansson et al. (1993: chaps. 2-22).

4. For example, per capita energy use in OECD Europe is
currently about 20 per cent less than in Eastern Europe and the
former Soviet Union. In the accelerated policies scenario, per
capita energy demand declines in OECD Europe and increases 60 per
cent by 2050 in Eastern Europe and the former Soviet Union. In
light of the rapid economic and political changes now under way,
it is doubtful that these two regions will take such divergent
paths.